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GDP growth not reaching paychecks

The economic recovery that began in 2001 has lifted productivity growth and employment of late, but has had little impact on many workers' wages.

September 5 2007: 4:00 PM EDT

NEW YORK (CNNMoney.com) -- The economic expansion that began six years ago has failed to benefit most workers, according to a report from the liberal Economic Policy Institute, released Monday.

Productivity growth, although slower of late, has been strong since 2000. After a sluggish start in the period, employment has picked up, although at a slower pace than in past recoveries. Yet, that growth hasn't transferred to workers' paychecks, particularly for workers at the lower and middle end of the pay scale, the report found.

While productivity jumped almost 20 percent since 2000, the real median hourly wage of all workers rose just 3 percent in the same period. Since 2003, productivity has risen 5 percent, while the median hourly wage fell 1.1 percent.

Women saw a bigger rise in wages between 2000 and 2007, up 4.7 percent. Real median wages for men during the same period were up just 1.1 percent.

Both high school and college workers saw hourly wage gains of about 2.5 percent since 2000.

Yet, in the period between 2003 and 2007, wage gains for median workers, male and female, as well as high school and college workers have all been flat or falling.

Not so for workers at the highest end of the wage scale. At the 95th percentile, real wages have risen 9.4 percent since 2000 and 5.1 percent since 2003.

A separate measure, the Employment Cost Index (ECI) showed faster growth of 5 percent since 2000. That's because unlike the measure of median wages, the ECI includes a broad range of workers and therefore gets a boost from high earners. Also, the ECI includes employer-provided benefits, which have risen faster than wages since 2000. However, even with these added advantages, the ECI has been roughly flat since 2003.

One of the reasons for the discrepancy between growth and productivity and real wages is that workers' bargaining power has diminished during the period, the report showed.

Although the unemployment rate has been low in historical terms, it doesn't fully reflect the problems in the labor market caused by weak job growth or workers withdrawing from the labor force altogether.

Looking forward, the combination of recent slower productivity growth and rising unemployment is likely to drag down wages in the near- to medium-term, the report found.

Editor's note: An earlier version of this story referred to the Economic Policy Institute as "nonpartisan." Though not affiliated with any party, the organization does have liberal leanings.